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American Arbitration Association

Arbitration Proceeding

Scott Wolinsky and Maria T.

Wolinsky,

Claimants

AAA Case No.

American International Industries,

Inc., and Daniel Dror,

Respondents

Claimants’ Demand for Arbitration

Claimants Scott Wolinsky and Maria T. Wolinsky file this Demand for Arbitration,

complaining of Respondents American International Industries, Inc. and Daniel Dror.

Discovery Control Plan

Claimants request that the arbitrator enter a discovery control plan.

Parties

Claimants Scott Wolinsky and Maria T. Wolinsky (“Claimants” or the

“Wolinskys”) are residents of Fairfax County, Virginia. Claimants are represented by Andrew K.

Meade and Jeremy M. Masten of HAWASH MEADE GASTON NEESE & CICACK LLP, whose

contact information is set forth below.

Respondent American International Industries, Inc. (“American”) is a Nevada

corporation, whose principal office is located at 601 Cien Street, Suite 235, Kemah, Texas

77565. This respondent is authorized to do business in Texas and may be served with process by

serving its registered agent for service of process, Rebekah Laird-Ruthstrom, 601 Cien Street,

Suite 235, Kemah, Texas 77565. American’s representative is not known at this time. This

respondent’s telephone number is (281) 334-9479, email addresses are amin@americanii.com

and rruthstrom@americanii.com, and fax number is (281) 334-9508.

Respondent Daniel Dror (“Dror”) is an individual resident of Texas and may be

served with process at his usual place of business, 601 Cien Street, Suite 235, Kemah, Texas

77565. Dror’s representative is not known at this time. Dror’s business telephone number is

(281) 334-9479, cell telephone number is (281) 330-9311, fax number is (281) 334-9508, and

email address is ddror@americanii.com. Dror’s home address is 1412 North Boulevard,

Houston, Texas 77006.

Jurisdiction & Venue

Claimants and Respondents (the “Parties”) have contractually agreed to submit

this dispute to binding arbitration held in Harris County, Texas, in accordance with the rules of

the American Arbitration Association. Pursuant to the terms of the Parties’ Share Purchase and

Sale Agreement dated October 1, 2013, Paragraph 5.8 states:

5.8

Governing Law. This Agreement is executed and performable in Harris

County, Texas. The Parties expressly agree that this Agreement shall be enforced,

governed and construed in all respects in accordance with the laws of the State of

Texas, and exclusive venue for all claims and causes of action for enforcement

or interpretation of this Agreement shall be subject to binding arbitration or

mediation upon the agreement of the Parties to be held in accordance with the

rules and regulations of the American Arbitration Association in Harris

County, Texas.

Additionally, Paragraph 7 of the Parties’ Settlement, Release and Confidentiality Agreement

states:

7. Governing Law; Waiver of Jury Trial; Arbitration. This Agreement shall in all

respects be interpreted, governed, and construed by and under the laws of the

State of Texas without regard to any conflict-of-law provisions. The Parties

hereby waive, to the extent permitted by applicable law, trial by jury in any

litigation in any court with respect to, arising out of or relating to this Agreement.

The Parties expressly further agree that any dispute arising hereunder shall be

determined by binding arbitration held in Harris County, State of Texas, in

accordance with the rules and regulations of the American Arbitration

Association. This provision is a material inducement for the parties to enter into

the Agreement.

Background & Nature of the Claim

Claimant Scott Wolinsky was a director of American International Industries, Inc.

from July 14, 2010 until he resigned on March 7, 2013. At all relevant times, Dror was an officer

of American.

When Scott Wolinsky indicated his intent to resign, Dror and American asked to

purchase all of Claimants’ shares of common stock in American (ticker: AMIN).

On October 1, 2013, to effectuate the share purchase/sale transaction, the Parties

entered into a Share Purchase and Sale Agreement (the “Agreement”). Pursuant to the

Agreement, Claimants agreed to sell their 89,540 AMIN shares (the “Wolinsky Shares”);

American agreed to buy the shares for a total of $330,000 in two stages; and Dror agreed to

guaranty American’s obligations.

For the first stage of the Agreement, American was to pay $130,000 to the

Wolinskys for 26,000 of the Wolinsky Shares (the “First Payment”). Although the Agreement

specifies a Delivery versus Payment (“DVP”) transaction, it was later discovered by both parties

that the Wolinskys’ brokerage, TD Ameritrade, would not permit such a transaction.

Accordingly, the Wolinskys had to transfer their 26,000 AMIN shares to American via a stock

transfer service (Registrar and Transfer Company). On October 23, 2014, the Wolinskys

transferred title of 26,000 AMIN shares to American and two weeks later, on November 7, 2013,

American paid $130,000 to the Wolinskys’ account.

10.

For the second stage, American executed a non-interest bearing promissory note

(the “Note”) in the amount of $200,000 (the “Second Payment”). Dror personally guaranteed the

Note and the Second Payment. The Second Payment was due and payable by American on or

before September 30, 2014 (the “Maturity Date”). Under the Agreement, American had two

options to make the Second Payment:

Option 1: Pay Claimants $200,000 in full on or before the Maturity Date,

in exchange for the Wolinskys’ remaining 63,540 AMIN shares; or

Option 2: Pay Claimants the difference between $200,000 and net

proceeds (“Net Proceeds”) received by Claimants from the sale of a

portion or all of 63,540 of the Wolinsky Shares into the public market as

directed by American over a period not to exceed sixty (60) trading days

(the “Trading Period”), prior to the Maturity Date.

11.

In other words, for American to satisfy the second stage, American could pay the

$200,000 in full, or direct the Wolinskys to sell all or part of their remaining 63,540 AMIN

shares into the public market and receive a credit against the $200,000 balance due for any

amounts the Wolinskys received from the sale of the Wolinsky shares after commissions.

12.

On July 1, 2014, Dror advised the Wolinskys by email indicating that American

elected Option 2 and would make the Second Payment. American and Dror then directed the

Wolinskys to sell all of the 63,540 Wolinsky Shares according to more specific instructions that

would follow. Dror’s email also instructed the Wolinskys to immediately sell 7,500 of the 63,540

Wolinsky Shares, thus establishing the first day of the Trading Period. From July 1, 2014 until

September 15, 2015, Dror instructed the Wolinskys by telephone or text to sell specific amounts

of AMIN shares into the public market at specific prices and at specific times, which resulted in

the Wolinskys receiving a total of $68,918.79 in Net Proceeds for selling 45,600 Wolinsky

Shares. The Trading Period expired on September 24, 2014, just prior to the Maturity Date.

13.

The last instructions that American sent to Claimants for selling Wolinsky Shares

was via a text message from Dror received on September 15, 2014, which was followed by an

email on same date from Dror requesting Claimants to provide an updated statement that

documents the Net Proceeds. Claimants sent the updated statement to Dror.

14.

As of this filing, Claimants still hold 17,940 Wolinsky Shares, and the balance of

the Second Payment totaling $131,081.21 is overdue. The 17,940 Wolinsky Shares remain in the

Wolinskys’ possession through no fault of their own, as American never provided instructions

for these remaining shares to be sold.

15.

Respondents have ignored several attempts by the Claimants and their

representatives to arrange to sell the remaining 17,940 Wolinsky Shares and complete the

Second Payment.

16.

The Maturity Date has passed and the $131,081.21 balance is due on the Note

from the remainder of the Second Payment.

Count 1 – Breach of Contract by American and Fraudulent Inducement

17.

The Agreement is a valid and enforceable written contract. The Agreement

provided that American would purchase all of the Wolinsky Shares in two stages in exchange for

total consideration of $330,000.

18.

The Wolinskys have fully complied with their obligations under the Agreement.

19.

American breached the Agreement by failing to pay the full amount owed under

the Agreement, as well as not complying with section 2.2(c) of the Agreement requiring

American to email instructions to the Wolinskys on Monday or the first trading day of each week

following each statement provided by the Wolinskys.

20.

It now appears that American never intended to make the Second Payment and

Dror never intended to honor his personal guaranty. For example, American’s Form 10-Qs and

10-K filed with the Securities Exchange Commission for the quarters ended September 30, 2013,

December 31, 2013, March 31, 2014 and June 30, 2014 explicitly indicate that American may be

“unwilling” to pay the Note when it comes due on September 30, 2014.¹

21.

The Wolinskys detrimentally relied on American’s and Dror’s representations that

they would pay pursuant to the terms of the Agreement.

22.

American’s breach and fraudulent inducement has caused injury to the

Wolinskys, which resulted in the following damages: the amount due and owing under the

¹ In American’s Form 10-Q filed with the Securities Exchange Commission for the quarter ended June 30, 2014,

American reported that it had $12,852,124 in total current assets and $865,705 in cash and cash equivalents.

contract ($131,081.21); legal costs and collection expenses incurred by the Wolinskys; punitive

or exemplary damages; and 5% interest.

Count 2 – Breach of Contract by Dror and Fraudulent Inducement

23.

The Agreement is a valid and enforceable contract. Dror personally guaranteed all

payments due from American as the primary obligor under the Agreement.

24.

The Wolinskys have fully complied with their obligations under the Agreement.

25.

Dror breached the contract by failing to pay the full amount owed under the

Agreement when American failed to do so by the Maturity Date.

26.

It now appears that American never intended to make the Second Payment and

Dror never intended to honor his personal guaranty.

27.

The Wolinskys detrimentally relied on American’s and Dror’s representations that

they would pay pursuant to the terms of the Agreement.

28.

Dror’s breach and fraudulent inducement caused injury to the Wolinskys, which

resulted in the following damages: the amount due and owing under the contract ($131,081.21);

legal costs and collection expenses incurred by the Wolinskys; punitive or exemplary damages;

and 5% interest.

Attorneys’ Fees

29.

The Wolinskys seek their reasonable attorneys’ fees, as provided for in the

parties’ contract and by section 38.001, TEX. CIV. PRAC. & REM. CODE.

Conditions Precedent

30.

All conditions precedent to recovery by the Wolinskys have been performed or

have occurred.

Conclusion & Prayer

Claimants Scott Wolinsky and Maria T. Wolinsky respectfully request that Respondents

American International Industries, Inc. and Daniel Dror be cited and required to appear and answer, and

that Claimants have recovery against Respondents for: